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White knights

UK growth funds have marginally outperformed UK income funds in recent times but income funds have consistently outperformed over the longer term. In today’s volatile markets, higher dividends and increasing profits matter more than ever.

Principal Investment Management’s white list provides an excellent in-depth study of UK income funds. I believe an income of 3 per cent or more is the standard and under that figure the funds are not truly income funds. However, I do make an exception for Invesco Perpetual high income managed by Neil Woodford which yields 2.9 per cent.

The highest growth in terms of net income over the past five years was achieved by Royal Bank of Scotland equity income. In terms of overall performance, however, Axa Framlington equity income is the winner, marginally ahead of Invesco Perpetual high income, with the RBS fund only 20th.

The funds that Principal recommends are Invesco Perpetual income and high income, Artemis income, F&C stewardship income and F&C UK growth & income managed by Ted Scott, Standard Life UK equity high income, Jupiter income and the two Axa Framlington income trusts run by George Luckraft.

Some of these funds are very big and are becoming more difficult to manage so it is worth looking at Neptune income and Marlborough UK equity income which is only £64m and well into the top 10 over five years to June 29, 2007.

PSigma income managed by Bill Mott has a good chance of becoming the top performer of all, as his record when he was running the Credit Suisse income funds was outstanding.

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